We will soon step into the third year of GST. For now, businesses are struggling with compliance for FY 2017-18 the very first year of GST implementation. The annual return for financial year 2017-18, called GSTR-9, is due on 30th June 2019, is a complex form that requires extensive reconciliation.

GSTR-9 is an annual return format, which must be filed by all those who are registered under GST. Therefore, all regular taxpayers must file GSTR-9, while there’s a separate form for composition scheme taxpayers and e-commerce operators. Taxpayers with annual turnover in excess of Rs 2 crore, must also file GSTR-9C along with GSTR-9.

GSTR-9C is a reconciliation of GST as per GSTR-9 (the annual GST return) and GST as per audited financial accounts. GSTR-9 must be filed for each GSTIN of a business. The main sources of populating GSTR-9 are the returns, GSTR-1 and GSTR-3B.

GSTR-1 is filed by businesses to report supplies made by them and GSTR-3B is used for payment of taxes. While GSTR-9 may seem like a collation of these 2 returns, it isn’t as simple as that. It requires taxpayers to carry out extensive reconciliation. This reconciliation is between the returns filed by them for reporting supplies, paying taxes and those filed by their vendors, and also with the books of accounts. The information sought in GSTR-9 is split between tables some of which gets auto-populated by returns already filed, while some have to be filled in by the taxpayers themselves.

Some taxpayers who paid RCM tax of one financial year in the next financial year’s GSTR-3B may face reporting issues. Suppose RCM tax is paid via GSTR-3B of FY 2018-19, but supplies (inward supplies) were received in FY 2017-18. Due to the manner in which information is plotted in the tables, such a tax payment if included has the effect of increasing turnover in GSTR-9, leading to payment gaps.

GSTR-1 form allows taxpayers to report additions and amendments to supplies made. While actual taxes paid are plotted in the annual return via GSTR-3B. Table number 10 and Table number 11 of GSTR-9 have to be used for reporting amendments made and must be as per GSTR-1 based on instructions provided. However, Table number 9 already includes taxes paid as per GSTR-3B, leading to confusion on how amendments must be included in the annual return. This can lead to mismatches between the two sets of information where these are not an exact match.

There have been cases where some small businesses, paid taxes online but filed an incorrect GSTR-3B due to lack of resources and time. So they are caught in a situation where taxes are paid, but incorrect values are reflecting in the auto-populated parts of GSTR-9, through GSTR-3B.

Some businesses are yet to draw reconciliations, between GSTR-1, GSTR-2A and GSTR-3B. Too many changes in the process of filing have kept some away from compliance with GSTR-9. Some businesses have un-reconciled issues (discussed above) or cases where B2B sales and B2C have been misreported and cannot be amended now (since amendment is only allowed once).

Successful filing of GSTR-9 requires data to be thoroughly reviewed and reconciled. Understanding the causes of differences between the books of accounts and GST annual return is key to satisfactory compliance. Thousands of line items of data cannot be reconciled without using a smart solution that quickly points out and helps fix gaps. Therefore, businesses must begin with preparation of GSTR-9 without any further delay.

Ongoing issues with GSTR-9 must be quickly resolved. This must be done on a priority basis while a new GST return mechanism is being planned. After all, a successful closure of the first year will help taxpayers move on and prepare to match and reconcile data for the following years.

Unfortunately, some taxpayers are wary of carrying out any reconciliation between books of accounts and GST. Tax officials, they say, want to pick up whichever is a higher turnover, leading to a higher GST payout and consequently more collections for the government. So there is fear of heightened scrutiny leading to adverse notices and disputes.

Also, wherever ITC is not available due to fault of the seller, buyers are unwilling to forego credit, leading to potential disputes with the authorities. Notably, no additional ITC claims can be made via GSTR-9, though additional tax payable found during reconciliation must be duly deposited with the government.